KTM N. Am., Inc. v. Cycle Hutt, Inc.

• Decision Date: 08 May 2013
• Docket Number: CIV. 13-5033-JLV
• Parties: KTM NORTH AMERICA, INC., an Ohio Corporation; KTM-SPORTMOTORCYCLE AG, an Austrian Corporation, Plaintiffs v. CYCLE HUTT, INC., a North Dakota Corporation; STURGIS CYCLE HUTT, LLC, a South Dakota Limited Liability Company; DIRT PROMOTIONS, LLC, a South Dakota Limited Liability Company; JUSTIN BOHN, an individual; TAMMY BOHN, an individual; and DOES 1-50, inclusive, Defendants.
• Court: U.S. District Court — District of South Dakota

KTM NORTH AMERICA, INC., an Ohio Corporation;

KTM-SPORTMOTORCYCLE AG, an Austrian Corporation, Plaintiffs

v.CYCLE HUTT, INC., a North Dakota Corporation; STURGIS CYCLE HUTT, LLC,

a South Dakota Limited Liability Company; DIRT PROMOTIONS, LLC, a South Dakota Limited Liability Company;

JUSTIN BOHN, an individual; TAMMY BOHN, an individual; and DOES 1-50, inclusive, Defendants.

CIV. 13-5033-JLV

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH DAKOTA WESTERN DIVISION

Dated: May 8, 2013

TEMPORARY RESTRAINING

ORDER AND ORDER TO

SHOW CAUSE ON

PLAINTIFFS' MOTION FOR

A PRELIMINARY

INJUNCTION AND

PERMANENT INJUNCTION

INTRODUCTION

On May 1, 2013, plaintiffs KTM NORTH AMERICA, INC. ("KTM NA"), an Ohio Corporation, and KTM-SPORTMOTORCYCLE AG ("KTM AG"), an Austrian Corporation, filed a verified complaint alleging a number of claims against the defendants. (Docket 1). On May 2, 2013, plaintiffs filed an ex parte motion, with supporting declarations, for a temporary restraining order ("TRO"). (Dockets 10, 11 & 12). On May 3, 2013, the court entered an order setting a hearing on plaintiffs' motion for a TRO and requiring plaintiffs to serve a copy of the order and all documents filed in this case on defendants or counsel for defendants, if known to plaintiffs. (Docket 16).

On May 7, 2013, the plaintiffs appeared through their attorneys of record, Thomas G. Fritz and Gary K. Brucker, Jr. Defendants did not appear for the hearing, either in person or through counsel. The court considered the plaintiffs' filings, considered the arguments of counsel, and entered an oral order granting plaintiffs' motion for a TRO. The court's oral findings are incorporated into this order.

CRITERIA FOR ISSUANCE OF A TEMPORARY RESTRAINING ORDER

Under Fed. R. Civ. P. 65 the court may enter a TRO with or without notice. Fed. R. Civ. P. 65(b)(1). The court chose to require plaintiffs' counsel to give notice to defendants' attorney, if known to plaintiffs' counsel.¹ (Docket 16 at p. 2). A TRO may issue only if "specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition . . . ." Rule 65(b)(1)(A). Once a TRO is entered its duration may "not exceed 14 days . . . unless before that time the court, for good cause, extends it for a like period or the adverse party consents to a longer extension." Rule 65(b)(2). If a TRO is entered "without notice, the motion for a preliminary injunction mustbe set for hearing at the earliest possible time, taking precedence over all other matters except hearings on older matters of the same character." Rule 65(b)(3). "The court may issue a . . . temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained." Rule 65(c).

A TRO is an extraordinary remedy and the burden is on the movant to show relief should issue. Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003) (citations omitted). The district court has sound discretion to grant or deny such relief. Dataphase Systems. Inc. v. C L Systems, Inc., 640 F.2d 109, 114 n. 8 (8th Cir. 1981) (en banc).

Prior to eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), preliminary injunction actions involving allegations of intellectual property infringement were evaluated differently from other alleged violations of law. In copyright, patent, and trademark cases, the second Dataphase factor, irreparable harm, was presumed once the moving party made a prima facie case of infringement. In 2006, the Supreme Court ruled in eBay preliminary injunction actions involving allegations of intellectual property infringement should not be evaluated according to different criteria. Id. at 393. The Supreme Court held no presumption of irreparable harm was warranted simply because a prima facie case of infringement could be made. Id. at 393-94. Eventhough the United States Court of Appeals for the Eighth Circuit has yet to acknowledge eBay's holding with respect to the preliminary injunction factors, other district courts in this circuit have recognized the change.² See, e.g., Southeast X-Ray, Inc. v. Spears, No. 2:13-CV-02026, 2013 WL 882437 (W.D. Ark. Mar. 8, 2013); Travel Tags, Inc. v. UV Color, Inc., 690 F. Supp. 2d 785 (D. Minn. 2010); CHS. Inc. v. Petronet, LLC, Civ. No. 10-94 (RHL/FLN), 2010 WL 4721073 (D. Minn. 2010). Accordingly, the court will use the same four-factor Dataphase analysis in evaluating plaintiffs' trademark infringement claims making no presumptions as to irreparable harm.

The four Dataphase factors to be weighed by the court in deciding whether to grant or deny a TRO or preliminary injunctive relief are:

1. The threat of irreparable harm to the movant;

2. The state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant;

3. The probability that movant will succeed on the merits; and

4. The public interest.

Dataphase Systems, Inc., 640 F.2d at 113. In later cases, these factors are identified as the "Dataphase factors."

"[W]hen weighing these factors to determine whether the extraordinary relief of a [TRO] should be granted—no single factor is in itself dispositive." National Wildlife Federation v. Harvey, 440 F. Supp. 2d 940, 958 (E.D. Ark. 2006) (citing Calvin Klein Cosmetics v. Parfums de Coeur, Ltd.,824 F.2d 665, 667 (8th Cir. 1987). "All of the factors must be considered to determine whether the balance weighs towards granting the injunction." National Wildlife Federation, 440 F. Supp. 2d at 958 (citing Dakota Industries. Inc., 988 F.2d 64 (8th Cir. 1993). "In deciding to whether to grant [an] . . . injunction, 'likelihood of success on the merits is the most significant.' " Minnesota Ass'n of Nurse Anesthetists v. Unity Hosp., 59 F.3d 80, 83 (8th Cir. 1995) (citing S & M Constructors. Inc. v. Foley Co., 959 F.2d 97, 98 (8th Cir. 1992)). With this legal framework, the court makes the following limited findings from plaintiffs' submission.

FACTS

Plaintiff KTM NA is a corporation organized and existing under the laws of the state of Ohio. (Docket 1 at ¶ 5). Plaintiff KTM AG is a corporation organized and existing under the laws of the country of Austria. Id. at ¶ 6. KTM NA is the exclusive distributor in the United States of KTM-branded motorcycles and related products manufactured in Austria by KTM AG. Id. at ¶ 1. KTM NA sells these products in the United States through a network of authorized KTM dealerships. Id.

Defendant Cycle Hutt, Inc. ("Cycle Hutt") is a corporation organized under the laws of the state of North Dakota and doing business in the states of North Dakota and South Dakota. Id. at ¶ 7. The principal place of business of Cycle Hutt is currently Sturgis, Meade County, South Dakota. Id. Defendant Sturgis Cycle Hutt, LLC ("Sturgis Cycle Hutt") is a limited liability company organized under the laws of the state of South Dakota. Id. at ¶ 8. The principal place of business of Sturgis Cycle Hutt is currently Sturgis, Meade County, South Dakota. Id. Defendant Dirt Promotions, LLC ("Dirt Promotions") is a limited liability company organized under the laws of the state of South Dakota. Id. at ¶ 9. The principal place of business of Dirt Promotions is currently Sturgis, Meade County, South Dakota. Id. Defendants Justin Bohn and Tammy Bohn, husband and wife, are residents of Sturgis, Meade County, South Dakota. Id. at ¶¶ 2, 10 & 11.

KTM AG develops and manufactures off-road and street motorcycles for racing, as well as related products such as all terrain vehicles ("ATVs"), parts, and accessories ("related products"). Id. at ¶ 17. KTM-branded products are distributed to approximately 1,200 independent dealerships worldwide through a network of international subsidiaries, including KTM NA. Id. KTM NA is the exclusive distributor of KTM-branded motorcycles and related products in the United States. Id. at ¶ 18. KTM NA markets KTM-branded motorcycles and related products to customers in the United States through a network of over300 authorized KTM dealerships. Id.

KTM AG is the exclusive owner of several trademarks registered with the United States Patent 8s Trademark Office ("USPTO"). Id. Plaintiffs are the exclusive owners of the following federally registered trademarks:

KTM (U.S. Trademark Reg. No. 1,664,945);

KTM POWERWEAR (U.S. Trademark Reg. No. 3,835,412);

KTM (U.S. Trademark Reg. No. 3,436,150);

KTM &Design (U.S. Trademark Reg. No. 3,547,084);

KTM & Design (U.S. Trademark Reg. No. 3,606,168);

KTM & Design (U.S. Trademark Reg. No. 3,606,165);

KTM & Design (U.S. Trademark Reg. No. 3,708,763);

KTM & Design (U.S. Trademark Reg. No 3,606,164);

KTM (U.S. Trademark Reg. No. 3,440,999);

KTM X-BOW (U.S. Trademark Reg. No. 3,431,455); and

KTM (U.S. Trademark Reg. No. 3,398,627).

Id. at ¶ 19 (collectively, "the KTM marks"). The KTM trademark has been continuously used in interstate commerce by plaintiffs in connection with KTM-branded motorcycles and related products since 1978. Id. at ¶ 20.

Cycle Hutt became an authorized KTM dealer in June 2000 pursuant to a dealership agreement with KTM NA. Id. at ¶ 25. In 2003, Cycle Hutt and the Bohns executed an addendum to the dealership agreement regarding KTM NA's intellectual property rights and acknowledged KTM NA owned all rights, title, and interest in KTM NA's trademarks, including the mark KTM. Id. After the addendum to the dealership agreement was executed, Cycle Hutt and the Bohns registered a number of websites containing the KTM mark, including, www.ktm.com. Id. at ¶ 26. Through their online presence, Cycle Hutt and theBohns were able to sell KTM-related products at prices substantially below the manufacturer's suggested retail price. Id.

Litigation between the plaintiffs, Cycle Hutt, and the Bohns in the United States District Court, District of North Dakota, was resolved in 2004 through a...